Principles of Management Accounting (MAC2601)

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1 MAC601/01/1/013 Principles of Management Accounting (MAC601) TUTOIAL LETTE 01 (Solution of assignment 1 unique number: 74196) DEPATMENT OF MANAGEMENT ACCOUNTING

2 CONTENTS 1. INTODUCTION.... ASSESSMENT PLAN ASSIGNMENT 01/ WOKINGS Introduction Dear Student Enclosed please find the suggested solution for assignment 01/013 (first semester). It is in your own interest to compare the suggested solutions with your own answers and, should there be any differences, to establish whether calculation errors or errors of principle have been made. Kind regards, Telephone number Office number K Nzhinga (Mr) (01) M amaleba (Mr) (01) MAC S1@unisa.ac.za JM Verster (Mrs) (01) LECTUES: MAC601

3 MAC601/01 Assessment plan Assignment 01/013 (First semester) Number Correct alternative Question & reference 1. (3) Cost object Question 1A; definition, Study Guide 1, p 6. (4) Question 1A, calculation 1 3. (4) Question 1A, calculation 4. () Question 1B, calculation 3 5. (3) Question 1B, calculation 4 6. (1) 775 racquets and 645 racquets Question A, calculation 5 7. (4) Question A, calculation 6 8. () 5,64 Question A, calculation 7 9. (1) Credited with overapplied Question B, calculation 8 overheads 10. (1) Apple: 7; Berry: 54 Question C, calculation (4) FIFO: 4 75,00; WAM 4 5,10 Question 3, calculation () Question 3, calculation () 4 734,75 Question 3, calculation (3) Question 3, calculation (4) 5 584,5 Question 3, calculation (3) Sales less variable cost of sales Question 4; definition, Study Guide 1, p (3) Sales less cost of sales Question 4; Study Guide 1, p (1) Question 4, Calculation (1) Question 4, Calculation 1 0. (3) Question 4, Calculation 13 3

4 3 Workings 1. In question 1, part A, the total operating costs for December 01 amount to: Type ZWP Type XB Total Manufacturing costs Direct material (159 x 4 000) (163 x 5 000) Direct labour (50 x 45/60 x x 4 000) (50 x 45/60 x x 5 000) Manufacturing OH ( ) Non-manufacturing costs Salary of the administrative assistant Marketing costs 000 Total operating costs = = 163. Prime cost is the total of all the direct costs. It is the costs for direct materials and direct labour = (only XB was asked). 3. In question 1, part B, the total budgeted fixed printing cost for 013 is: Key formula: VAIABLE COST PE UNIT (HIGH-LOW METHOD) = = = The difference between cost at highest and lowest activity The difference between highest and lowest activity = 1,50 per photo Fixed costs = total mixed costs for related activity level (variable cost per unit x related activity level) = (1,5 x 9 000) = = 500 (per month) 500 x 1 = for the full year (01). No changes expected for 013, therefore 013 also

5 MAC601/01 4. In question 1, part B, the margin of safety based on the budgeted figures for the year will be: Key formula: CONTIBUTION Contribution = sales total variable costs = 0 0,15 (0) 1,50 = 0 3 1,50 = 15,50 per unit Breakeven point in units = Total fixed cost Contributi on per unit = 15,50 = ,193 units rounded UP to units Key formula: MAGIN OF SAFETY (IN UNITS O VALUE) Margin of safety in units = Total sales (units) - breakeven sales (units) = x 1, = = units Margin of safety in value = units x 0/unit = Economic order quantity of the proposed new products for Wimbledon Mania: We ignore the warehouse rent, as it is a fixed cost that does not vary with the size of the order. Wacky acquet EOQ = U H C = Square root of: = 774, racquets Woza acquet EOQ = U H C = Square root of: ( 500 5) 16 (9 1) = 644, racquets 5

6 6. Weekly net wage of Mr. Wimbledon Normal wage (40 hours x 100) Overtime (8 hours x 100 x 1,5) 1 00 Gross wage 5 00 Less: Pension (7,5% x 4000) 300 Taxable income Less: Deductions: Medical aid 80 UIF (1% x 5 00) 5 PAYE (18% x 4 900) 88 Weekly net wage Step 1: Calculate the annual productive time Hours Number of clock hours in a year 5 weeks x 40 hours 080,0 Less: Vacation hours 15 days x 8 hours 10,0 Less: Public holidays 10 days x 8 hours 80,0 Available clock hours 1 880,0 Less: Normal idle time 6% x hours 11,8 Annual productive work hours 1 767, Step : Calculate the total annual labour cost Normal wage (5 3) 49 weeks x 40 hours x Vacation pay 3 weeks x 40 hours x Bonus pay 1 week x 40 hours x Pension fund: employer contribution 8% x UIF: employer contribution 1% x Medical aid fund: employer contribution efer errata on myunisa. Step 3: Calculate the hourly recovery rate Labour recovery rate = = Total annual labour cost (step ) Total annual productive work hours (step1) , hours = 5,64 per productive work hour 6

7 MAC601/01 8. Applied versus actual overheads: Applied overheads Actual overheads over applied as applied overheads are more than actual overheads. This should be credited to the cost of sales account. 9. Primary & secondary allocation: Production Service Overhead Basis Apple Berry Cherry Date TOTAL Building Insurance Floor area - m² Cafeteria No. of employees Machine Insurance Value of machines Indirect material Given Allocation of Date 50%; 30%; 0% Allocation of Cherry No. of employees ound to nearest and Calculation of overhead allocation rates: Apple Berry Budgeted overheads Budgeted labour hours Allocation rate 7, ,9557 ound to nearest and

8 10. FIFO METHOD Date eceipts Issues Balance Apr Quantity Price Amount Quantity Price Amount Quantity Price Amount , , , , , , , (50) (5,50) (75) 50 5, , , , , , , , (100) (5,80) (580) 50 5, , , , , , , (90) (5,50) (495) 90 5, , , , , , Value on 10 April which auditors can expect to find = = 4 75 Total value of issues of inventory for the month of April = The value of inventory at 30 April = Explanation Date Two batches are available: 00 5,00, which came in first, and 400 5,50, which came in last. 5 A quantity of 300 units is issued: 00 5,00 are issued first, then the balance of 100 units from the 400 5,50. 8 The 50 units are the price at which they were purchased on April 013. (eturns to suppliers are treated as negative receipts and subtracted from the balance.) 10 Two batches are available: 50 5,50, which came in first, and 500 5,80, which came in last. 1 The freight charges of 144 must be added to the cost of the batch. (480 x 5, = 544; = 5,30) 15 The 100 units are the price at which they were purchased on 10 April. (eturns to suppliers are treated as negative receipts and subtracted from the balance.) 8

9 MAC601/01 0 The first batch of 50 5,50 is issued, then subsequently, the batch of 400 5,80 is issued. Then 10 units are 5, ,30 are still in inventory. 3 It is stated in the question that the units returned from production are from the last issues made on 5 April. (eturns from production are treated as negative issues and added to the balance.) 5 The freight charges of 330 must be added to the cost of the batch. (440 x 5, = 530; = 5,75) The value of the inventory on hand at 30 April 013 according to the FIFO method of inventory valuation is THE WEIGHTED AVEAGE METHOD Date eceipts Issues Balance Quantity Price Amount average Average Amount Quantity price price (calc) Amount Apr , , , , , , , , , ,00 5 (300) (1 599,90) 300 5, ,10 (50) 5,50 (75) ,10 8 (50) (75,00) 50 5, , , , , , , , , , ,10 (100) (5,80 (580) , ,10 15 ) (100) (580,00) , , , , ,10 0 (660) (3 614,8) 470 5, ,8 (90) (5,333) (479,97) , , , , , , , , ,5 Value on 10 April which the auditors can expect to find = 1 35, ,00 = 4 5,10 Total value of issues of inventory for the month of April , ,8-479,97 = 4 734,75 9

10 The value of inventory at 30 April 3 054, ,00 = 5 584,5 Explanation Date The average price of the units in inventory after the receipt must be calculated: Add the units ( = 600) and the total cost ( = 3 00) Divide the total cost by the total units to obtain the weighted average price per unit. ( = 5,333) All the units are issued at the average price. (300 x 5,333 = 1 599,90) 5 To determine the balance, calculate the value of the units in inventory at the average price. The rounding causes a small change in the average. 8 Units are returned to the supplier at the actual cost price. (135,10 50 = 5,300) A new average price is calculated. The average price of the units in inventory after the receipt must be calculated: 10 Add the units ( = 750) and the total cost (135, = 4 5,10) Divide the total cost by the total units to obtain the weighted average price per unit. (4 5, = 5,633) 1 A new average price is calculated after each receipt. (6 769, = 5,503) 15 Units are returned to the supplier at the actual cost price. A new average price is calculated. (6 189, = 5,477) 0 All the units are issued at the average price. 3 Units are returned from production at the average price at which they were issued on 5 April. 5 A new average price is calculated after each receipt. (5 584, = 5,584) The value of the inventory on hand at 30 April 013 according to the weighted average method of inventory valuation is 5 584, ,80 x ( ) = ,80 + 1,00 + 6,00 = 8,80 (variable MANUFACTUING costs per unit) 1. Variable manufacturing cost per unit = 8,80 Fixed manufacturing cost per unit ( /5 000) = 7,0 36, x 36 = Absorption costing net profit Subtract: Fixed manufacturing cost in closing inventory (3 000 x 7,0) (1 600) Add: Fixed manufacturing cost in opening inventory Nil Direct costing net profit

APPLICATION OF MANAGEMENT ACCOUNTING TECHNIQUES. Department of Management Accounting

MAC3701/203/3/2015 Tutorial Letter 203/3/2015 APPLICATION OF MANAGEMENT ACCOUNTING TECHNIQUES MAC3701 SEMESTE 1 and SEMESTE 2 Department of Management Accounting This tutorial letter contains important